Friday, May 21, 2010

Many companies commit the mistake of equating ‘differentiation’ purely with ‘providing better quality’. There’s much more you can do with this thrilling strategy of differentiation.

Walk into the International Supermarket and Museum in Naples, New York, and you’ll learn how to pay your humblest tributes to “failed products”. About 60,000 products that failed in US supermarkets find a place in the museum. Hear out their names – Clairol’s Touch of Yogurt shampoo, Gerber Products baby food, Captain Cat Cat-Litter Deodorant, Gorilla Balls (a vitamin-rich candy), Yogurt Face and Body Powder, Gimme Cucumber hair conditioner, Soaps for Lovers, Moonshine aftershave, Buffalo Chip chocolate cookies, Batman Crazy foam, Hagar the horrible Cola, Kickapoo Joy Juice, Sudden Soda, and many more. Actually, how many of them have you heard of? None, because their ‘formulae’ – as in branding mix – failed to hit home their relative superiority to consumers. They were undifferentiated and therefore undervalued by the “quick to form a perception” consumer market. They were simply “commodities”. As Jack Trout writes in his book ‘Differentiate or Die’: “While categories are expanding thanks to the law of division, something sinister is happening. More and more of these categories are sliding into commoditisation. In other words, fewer and fewer of the brands in these categories are well differentiated. In people’s minds, they are there, but that’s about all!”

But then, what is differentiation (as opposed to selling the cheapest products – or price leadership)? Differentiation is simply ensuring that your prospective consumers are convinced that your product is superior relative to competitors. Nobel Prize winning theorists have proven that even if your products are in reality ‘not’ superior, as long as the consumers are convinced about the same, you’ve done your job and hit bull’s eye! But then again, what factor do you differentiate on? Obviously quality, right? Wrong! Or rather, not necessarily. While companies globally make the mistake of equating differentiation with ‘providing better quality’, the fact is that differentiation can be as successfully attempted on certain other key parameters. Here’s a primer with my most loved examples.

THE FIRST DIFFERENTIATOR – SERVICEEvery one who wishes to fly to London wants to be aboard the Virgin Atlantic. Not that it has more comfortable seats, not even that it has better planes and so flies faster; the reason is simple – unlike competitors, it has set itself apart as a brand that delivers superior “service”– 30,000 feet in the air. Little touches prove that – on a Virgin flight, underneath the salt and pepper shakers, modeled on mini-airplanes, you’ll find the words “Pinched from Virgin Atlantic.” The butter knife is engraved with the words “stainless steal”. And there’s always a bar in the upper class cabin so that its travellers can chat and socialise. The airline was the first to really stretch the grade of what is called service in air to the next yard. It was the first to put in seat-back televisions, and serve ice-creams while mid-flight. “We did everything we could to lighten the mood and the experience. Twenty-five years later, the airline retains that very same sense of fun and the true ability to surprise and make people smile,” says Sir Richard Branson, Chairman of Virgin Group of companies.

And if you’ve ever heard of a company named Maruti Suzuki, you’ll know very well that the world buys Maruti cars purely on the basis of the geographic expanse of Maruti’s service outlets, rather than the design of its cars. That’s differentiation for you!

THE SECOND DIFFERENTIATOR – STYLEFor the world Nokia stands out for quality; truth is, that’s not the truth! As per the most recent Gartner study (May 2010), Nokia commands 36.4% of the world’s mobile device market share, while its next closest competitor is Samsung at 20.6% and the third is LG, with 8.6% global share. In India, Nokia fares better. As per the most recent ORG survey made public, Nokia rules with 59.5%, Sony Ericsson comes second with 8.1%, while Samsung is third with 7%. Now here’s the most recent shocker of 2010 for you – according the 2010 Wireless Traditional Mobile Phone Global Evaluation Study by J.D. Power and Associates, LG was ranked number one by customers in terms of “overall wireless customer satisfaction amongst all traditional handset brands”. This is the fifth year that LG has won the crown since 2003. Nokia was #7! The secret is, Nokia knows mobile consumers love newer designs, newer models, newer rehashes of the same old ‘stuff’, and Nokia rules on that differentiation: style!

Apple, a name which you often hear being associated with innovation, or technology for that matter is again one clever differentiator. Steve Jobs is cleverer. His company didn’t invent the portable music player, or the first laptop, or even the first smartphone. He only followed, and followed better! His iPod, iMac, iPhone have become bestsellers, but were never the ones which innovated technology. Jobs simply gave the products a better appearance, a better interface, a better style. In short he gave it a better overall design. That’s a style differentiator for you.

THE THIRD DIFFERENTIATOR – TECHNOLOGYHow many of you know whether Intel chips are faster or AMD? The fact is, AMD Athlon chips have even beaten Intel’s comparable chips in lab tests – and vice versa too. But right from the start, Andy Grove, the former Chairman of Intel (who wrote: Only the Paranoid Survive) realised that it didn’t matter what was true, it mattered what consumers believed. Through perceptionbuilding exercises, Grove managed to keep consumers convinced that Intel’s processors were technologically faster and superior than those of AMD. Since 1971, it has introduced 662 “unique” versions of the microprocessor; AMD has introduced just 79 versions since 1975! Intel has changed its logo four times; AMD has done it just once. Everyone wonders now it’s “Intel Inside”; how many ask if it’s “AMD Inside”? Nobody! For 2009, research firm iSuppli puts Intel’s share in the PC market at 80.6% (as opposed to AMD’s 12.1%), while IDC research puts Intel’s share at 80.5% (as opposed to AMD’s 14.4%). Even Fedex differentiated using technology rather than just service, where they were the first ones to provide customers with an online package tracking system.

AND OF COURSE – QUALITYAfter the setback caused to the Toyota brand post 8.4 million recalls in the beginning of 2010, none would have given the Japanese automaker a chance in the 2010 J.D. Power and Associates’ Vehicle Dependability Study, which was released in March this year. But Toyota’s longstanding belief in quality being a differentiator paid off. The study, after measuring and analysing drivers’ experiences after three years of vehicle ownership, gave Toyota the top spot in four segments – more than any other auto brand. While the Toyota Prius topped the list of the Most Dependable Compact, Toyota Sequoia was the Most Dependable Large MUV, Toyota Tundra was the Most Dependable Large Pickup and Toyota Highlander the Most Dependable Midsize MUV. You want to learn what quality differentiation is? Ask Toyota, which manages it despite multi-million recalls.

AND IF NOTHING WORKS – BRAND RECALLWhat do you do when your product cannot be differentiated on any factor? Then go for the simple and straightforward strategy of brand recall. Bombard the consumer ad nauseum with advertisements. He’ll hate you – yet, he’ll buy your product. Brand recall is too powerful. Be the Nike, which sells more not because it’s superior, but simply because it advertises much more than its counterparts like Adidas, Puma, Reebok, Converse, K-Swiss, Skechers, et al. Be the Procter & Gamble, Unilever, PepsiCo, Coca-Cola – each spend more than $2 billion each in advertising – where all you see in their ads are either celebrities or spanking humour (or both). Well, now you know why your wife hates you, yet still can’t let go of you :-)